Practice Sale Mythbusters – Part 2

As experienced brokers in Australia, my team and I are always amazed at the misconceptions that some vets have about the process of buying and selling a practice. In this series of articles, we thought we would address some of the more commonly heard and persistent seller misconceptions that we hear:

Seller Misconception #5: Buyers that look at my practice but don’t buy are “tyre kickers” and/or timewasters.

When a person is looking to buy a house for their family to live in, it is not uncommon for them to look at up to 10 houses before they make their purchase. Does that mean that they were insincere or intentionally wasting people’s time when they looked at the 9 that they didn’t purchase?

Of course not. They either hadn’t seen what they were looking for yet, or they hadn’t seen enough comparatives to know what “good” looked like yet.

Buying a vet practice is similar.

Buying a practice represents a significant commitment of a buyer’s resources into the future, both in finances and time. It stands to reason that authentic, sincere buyers will want to research comparatives before they commit. 

While it may be frustrating to have people look at your practice and not jump at the chance to own it, rest assured the buyer that does end up buying your practice is likely to have looked at several before they decided to buy yours.

Seller Misconception #6: My friend got $X for their practice, and my practice is better. I should get at least 1.5x that. 

When I hear statements Iike this, I have so many questions:

1. How do you know what your friend received?  The vet industry is full of “the fish was this big” stories where sellers exaggerate what they received or don’t mention the onerous terms in which they received it. I have also seen buyers exaggerate how little they paid.
2. How do you know what your friend had? Very few vets have seen the financials of their friend’s practices…are you relying on your friends account of this? (“the fish was this big” financials).
3. How similar is your practice to theirs? There is a different market for practices in different areas, with different clinical ranges, different key person dependence, different security of tenure, etc. I once had a client say something like this misconception to me, and they were comparing their rural practice to their friend’s suburban one. You would never compare a valuation of a house in Coober Pedy to one in Bondi…and yet business owners feel that their business valuations should sometimes apply.
4. How long ago did your friend sell? Markets change over time, with interest rates, cost of living pressures, the local and national economy and as corporate interest peaks and wanes….and so do the buying appetites of buyers.
5. What makes you think that your practice is better? Is it:

A. because you did better than them at university, know you are a better clinician and seem more successful? 

OR

B. because you KNOW their figures and KNOW that you have:

• Higher revenue
• Higher profit
• Less key person dependence
• A more easily recruitable location 
• Less need for reinvestment

Most of the time when we hear statements like this, we find that sellers think their practice is worth more because of (A) rather than (B). If you’d like to know what price might be achievable for your practice, there is no substitute for talking to an industry expert who has seen hundreds of practices, their financials and the prices that these practices are able to achieve.